Last week, we started a discussion on the importance of new ideas for growing your company and staying ahead of competitors. Those organizations that innovate continue to grow while those maintaining the status quo tend to stagnate.
Innovation is difficult because it requires taking an idea and turning it into something. There is no shortage of ideas. However, there is a shortage of wisdom, knowledge, and focus for transforming ideas into innovations.
Wisdom is necessary to select the right idea. Knowledge and focus are necessary to develop the execution framework and steps to turn the idea into an innovation reality.
Focusing on New Growth Innovations
Last week, I introduced you to the work of Scott Anthony of Innosight. In his recent article in HBR, he showed us the importance of separating new ideas into two categories.
Core innovations are lower potential projects expected to offer rapid returns, and they are near and complimentary to your current business process. Your competitors will often be aware of these innovations and likely be implementing many of the same projects you’re considering.
New growth innovations push the frontier of your strategy by developing something utterly original or doing something in a novel way. These innovations have the potential to produce substantial returns, but it will take much longer to realize revenue from them.
Most high performing real estate companies are effective at implementing core innovations. As new technologies and systems come into the market, a consensus seems to develop on what’s useful and advantageous in growing a real estate company. Once a few pilot programs are successful in the industry, the herd mentality soon ensues.
Core innovations allow your company to keep pace with competitors. New growth innovations (if you’re fortunate enough to successfully implement one) allow you to separate from your competitors.
How to Identify New Growth Innovations
The problem with new growth innovations is they are high-risk endeavors. It’s hard to identify the right opportunity and maintain the long term focus to see an opportunity come to fruition.
In his article, Anthony outlines a process for addressing both of these issues. First, he addresses how to select a new growth innovation.
Set a timeline. You could spend months or even years conducting a comprehensive analysis, but of course we don’t recommend that. Instead, we suggest doing three weeks of research, with the aid of a handful of executives you expect will be involved in your innovation efforts.
The “research” should involve talking with your industry peers and current customers looking for unmet needs, considering technology and business system improvements in other industries, and asking your agents and employees for ideas that are bubbling up around them.
Put everything possible on your list and encourage the others on your team to do the same. Once this is done, Anthony suggests the next step:
Filter ideas through a strategic opportunity framework. Lock the members of your innovation team in a room for an afternoon and share the “findings” of each person’s research. A good new growth innovation will combine the following:
-a job many potential customers need but no one is addressing very well.
-a technology that will enable customers to do that job more easily, cheaply, or conveniently, or a change in the economic, regulatory, or social landscape that is greatly intensifying the need for that job.
-some special capability of your company that competitors can’t easily copy and will give you an advantage is seizing this opportunity.
An Example of a New Growth Innovation
To illustrate the point, let’s take an example you’re familiar with and see how it fits Anthony’s suggested framework.
In 2005, Rich Barton and Lloyd Frink, two former Microsoft executives, founded Zillow. Their new growth innovation identified a job (quickly and easily determining the value of a home) not being addressed adequately by the marketplace. At the time, there was technology emerging (among other things, instant online access to millions of public tax records) allowing this job to be done more easily, cheaply, and conveniently. Finally, and perhaps most importantly, Barton and Frink had special capabilities to make this innovative idea a reality because of their previous work at Expedia.
Did the Zillow founders go through Anthony’s process? Probably not, but it’s easy to see how new growth innovations such as Zillow fit this pattern.
Deciding Which Growth Innovation is Right for Your Company
Few of us will initiate and have the unique capacity to execute a new growth innovation as substantial as Zillow’s multi-billion dollar idea. However, the framework still applies on a smaller scale.
Anthony gives a final warning before selecting the growth innovation that is right for your organization.
If you take care to combine all three criteria, you can avoid some of the more common innovation traps, such as pursuing a phantom opportunity only because it seems so big there must be money in it somewhere, or wandering into a new market where you have no natural advantage.
Making the final decision on a growth innovation is not easy. However, focusing attention on one great idea is much better than allowing your attention to be diluted across several opportunities.
In our next discussion, we’ll discover how to execute a predictable process for implementing a growth innovation. As one of my mentors once told me, “Everyone who has taken a shower has had a great idea. Taking an idea and turning it into a reality is the hard part.”
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